Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 Index called to open flat at 6950, despite overnight Fed-inspired volatility that saw it trade as high as 6985 and as low as 6930. Overall, December’s Santa rally remains valid. A falling channel since Tuesday’s highs could be a bullish flag that takes us back to last week’s 7065 highs. Bulls need a break above 6960 (maybe even 6980). Bears want to see 6930 to cancel out overnight rising lows and open the door for a revisit of 6900, even 6850. Watch levels: Bullish 6965, Bearish 6930.

Calls for a flat open follows a mixed Asian session and a negative US close. The latter was derived from a more hawkish Fed outlook than markets had anticipated (economy and inflation continuing to improve) in spite of uncertainty regarding a Trump presidency. This has only gone to heighten global monetary policy divergence concerns, peers still in easing mode with rates at rock bottom, if not negative, and QE bond-buying stimulus still in play.

Fresh Fed forecasts for three US rate hikes in 2017 was higher than consensus of just two, a number we had regarded as fair, with potential for an upgrade or downgrade mid-year without spooking investors. Instead, we’re back to where we were this time last year with a rate hike and a more aggressive path for US monetary policy normalisation than markets had expected. Will Trump help or hinder with his plans for stimulus, deregulation and big spending?

Japan’s Nikkei is positive, outperforming peers thanks to Fed-inspired dollar strength delivering welcome JPY weakness to assist exporter names. Australia’s ASX is down in the dumps as the AUD rallied on strong jobs data, commodities (notably Oil and Gold) were dented by a strong USD and China gave up ground along with emerging markets which took a hit from a Fed rate hike and rather hawkish outlook.

US equity markets fell from recent record highs as the Fed rate hike impacted stateside bourses. The Dow Jones failed to reach the revered 20k mark as the interest rate rise saw the Dollar rally to its highest level since 2003, impacting Energy names whilst the defensive Utility sector also took a hit. The S&P 500 was led 0.8% lower by its equivalent sectors whilst the tech-focused Nasdaq composite fell 0.6%.

Crude Oil prices slipped once again despite a US inventory drawdown inspired rally as the announcement of the US rate hike pushed the US Dollar to a fresh 13-year high on a trade-weighted basis. Despite a marginal recovery during Asian trading hours, both Brent and US remain well off post-OPEC production cut highs of Monday, trading at $54 and $51 per barrel respectively.

Gold price suffered as a result of the widely expected Fed rate hike as investors moved away from the non-yielding safe haven asset, falling to fresh 10 month lows shortly after the announcement. Despite brief respite in early Asian trading, mounting pressure in the form of USD at its highest level since 2003 will likely see the decline in gold continue in the short term.

In focus today will of course be the fallout from last night’s Fed rate hike decision. Nonetheless we also have the Bank of England’s (BoE) own monetary policy update at midday.

Even if no rate or QE change is expected from the BoE, markets will be looking for more clarity on its outlook for 2017. This week’s UK CPI showed continued improvement but Brexit uncertainty remains firmly in the Bank’s thoughts. GBP may be off its depressed lows and doing well versus a struggling Euro, but Fed-inspired USD strength has knocked the Sterling from recent post-Brexit highs.

Data-wise, a raft of European Manufacturing and Services PMI (preliminary) are released this morning, with French figures seen slowing in comparison with Germany’s mixed bag (Manufacturing increasing, Services slowing slightly) before headline Eurozone figures (forecast unchanged). UK November Retail Sales are expected to show retreat from last month’s highest reading since 2014, seen flat MoM whilst falling to 6.0% YoY.

This afternoon’s US data comprises of US Inflation, seen mixed as the monthly figure decreases slightly although the yearly comparison is set to marginally improve. This is released alongside the Philly Fed, Empire State Manufacturing and Weekly Jobless figures. Stateside Manufacturing PMI is forecast higher with the day rounded of by an unchanged Housing Market Index.

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UK Company Headlines: (Source: Reuters/DJ Newswires)

• JD Sports says to investigate Kingsway facility over working condition concerns
• Tate & Lyle names Blackstone executive as chairman
• Just Eat buys Canada's SkipTheDishes for initial C$110 mln
• Hochschild comments on temporary stoppage at Pallancata operation in Peru
• AB InBev to sell stake in Distell to South Africa's state pension fund
• EnQuest names new Chief Operating Officer
• British firm Bunzl sees FY revenue boost from recent acquisitions
• Centrica lifts earnings outlook on cost cuts, strong energy trading
• Centrica sees 2016 capital investment of about £900m
• Subsea 7 awarded contract in the Norwegian North Sea by Centrica
• UK's Ofwat awards £18.8m to Severn Trent on performance
• Britain's Go – Ahead says Southern rail strikes hitting costs
• UK's CMA considers accepting undertakings on John Menzies aviation deal
• John Menzies to consider position on Aberdeen airport and respond to UK's CMA
• Buznl sees FY revenue at constant currency up between 4-5%
• Shell says CFO Simon Henry to retire, names successor
• Alliance Trust proposes new approach to investment management of equity portfolio
• GVC Holdings says to increase special dividend by 49%
• 888 sees FY adj EBITDA in line with its expectations
• Copper shakes off stronger dollar to rise
• PZ Cussons 1H17 Trading to Date in Line; Balance Sheet Remains Strong
• Alliance Trust Plans Share Buyback Program
• Petrofac Sees 2016 Underlying Net Profit in Line with Expectations